Montreal-headquartered Radialpoint has acquired Toronto's Casero Inc., tying its ISP-delivered services and support with Casero's content storage and sharing technologies. Since the companies share BCE Inc. as a customer, what does this mean for Canadian ISPs?
"There were tight synergies between Radialpoint and Casero," Singu Srinivas, Radialpoint's VP of sales and marketing, tells Network Letter. "First, we think white-labelling online storage and sharing is a growth area; second, Casero is 100% focused on the ISP channel, as are we; and lastly, Casero has a quality management team and we both have Bell Canada Enterprises as a common customer."
In fact, the Bell Canada relationship may be a significant reason why a hypothetical marriage became a de-facto union: Radialpoint wants to be able to give ISPs the opportunity to offer well-integrated, branded solutions to their end-users, and Bell could be the proving ground for a bigger shift.
"I definitely think this is part of a larger trend," says Kurt Scherf, VP and principal analyst at research-firm Parks Associates. "Managed security and tech support services are on the increase, as is online back-up for consumers, but profitability is a major challenge right now."
That said, profitability is not always the issue: there are costs associated with responding to support areas that are beyond the response capabilities of an ISP. This is one reason why in January Radialpoint announced its purchase of Boston-based HiWired Inc., a provider of premium technology support services.
"Analysts have covered this area in depth, and estimate that 20% to 40% of ISP calls are 'out-of-scope' issues," says Scherf. "Even if that call is only a few minutes, it is a cost driver. But if you can sell a premium support package then you have solved the problem."
It's difficult to know if these services represent so much value to a big player like Bell that they threaten smaller Canadian ISPs. Storage is getting cheaper, new online networks offer numerous content and document sharing options, and security scanning is being covered by a number of vendors, some of them for free. But obviously a big company like Bell is betting that providing security and content services can give them an advantage over smaller Canadian ISPs - as well as an opportunity for enhanced revenue streams.
"For ISPs the Radialpoint offering is two-pronged," says Scherf. "ISPs need to deploy to their customers at home and reduce support costs. And ISPs are becoming server farms in their own right, so they might as well take this opportunity to make a profit off of it."
As it stands, online backup alone is not that compelling. This has been proven by the failure of other offerings such as Hewlett-Packard's HP Upline, discontinued as of March 31, 2009, and America Online's AOL Xdrive, shut down on January 12, 2009. The pure-play economics of storage is tough, but that doesn't mean there isn't opportunity in bundling storage with value-added services.
"We see a huge opportunity with content sharing bundled with premium support and security services," says Srinivas from Radialpoint. "Security is a fragmented market, with a lot of people coming at it from different angles, and many are struggling with their channels - but security is relevant to the ISP channel."
Neil MacDonald, VP and Gartner Fellow with Gartner Research, agrees. "The little security vendors are having a harder time out there, and will be looking to be acquired - we are seeing evidence of that," he says.
MacDonald adds that acquisitions will be made to fill out portfolios, as Radialpoint is doing. With this strategy Radialpoint can deliver from the main point of Internet contact - the ISP - onto the desktop. As less and less data are stored on local devices, Radialpoint can offer ISP customers options such as an easy-to-read dashboard interface.
"The dashboard can function as one service point," says Srinivas. "Users can get their security status at home and find out if their web keys are encrypted. This reflects the historical trend to get customers on to premium bundles and increase an ISP's ARPU."
The takeover of Casero comes during a period of tough news for Canadian IT companies. In the past two weeks alone Ottawa-headquartered DragonWave Inc. has announced it was cutting 20 people from its staff of 160, Vancouver's Intrinsyc Software International said it was laying off 30% of its workforce - about 90 people - and Toronto's AirIQ Inc. is cutting 36% of its staff. By comparison, in the past five years Radialpoint has grown from 75 to 250 employees, and expects to exceed the $100 million mark in annual revenue within the next two years.
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